This rule sets forth State requirements for preadmission and annual review of individuals with mental illness or mental retardation who are applicants to or residents of nursing facilities that are certified for Medicaid. It also sets forth an appeals system for persons who may be transferred or discharged from facilities or who wish to dispute a determination made in the preadmission screening and annual review process. These provisions implement several provisions of the Omnibus Budget Reconciliation Act of 1987 (OBRA '87), Public Law 100-203 and the Omnibus Budget Reconciliation Act of 1990 (OBRA '90), Public Law 101-508.